- Instead of staking its claim through permission, the SEC is using omission, and looking to exempt selected cryptocurrency firms from specific securities laws that would help the industry come into compliance.
- The SEC’s repeated rejection of a spot-backed Bitcoin ETF provides little motivation for companies which are currently operating in a regulatory no-man’s land to sit down for a chat with regulators as well.
With a bipartisan bill that would hand over most of the jurisdiction of cryptocurrencies to the U.S. Commodity and Futures Trading Commission making its slow but sure passage through Congress, the U.S. Securities and Exchange Commission is making a last-ditch attempt to stake whatever remaining regulatory claim it has left in an industry dubbed the “Wild West.”
But instead of staking its claim through permission, the SEC is using omission, and looking to exempt selected cryptocurrency firms from specific securities laws that would help the industry come into compliance.
In an interview with Yahoo! Finance (yes it’s still around), Gensler, who last taught blockchain at the MIT Sloan School of Management before taking up the role of SEC Chairman said,
“We do have robust authorities from Congress to use our exemptive authorities that we can tailor.”
Because of the Lummis-Gillibrand bill that is making its way through Congress, which would give the CFTC additional authority to oversee cryptocurrencies deemed to be commodities, the SEC is making moves before the bill becomes law to try to assert some jurisdiction.
Gensler takes the view that cryptocurrencies which more closely resemble asset-backed securities and equity offerings ought to come under the purview of the SEC.
Where a stick may have been Gensler’s preferred tool in the past, he’s now offering a carrot to crypto companies,
““There’s a potential path forward. I’ve said to the industry, to the lending platforms, to the trading platforms: ‘Come in, talk to us.’”
Whether leaders of crypto companies will take the bait is another story altogether and stakeholders have long grumbled that the SEC has never provided a clear path to allow companies to register their product offerings.
The SEC’s repeated rejection of a spot-backed Bitcoin ETF provides little motivation for companies which are currently operating in a regulatory no-man’s land to sit down for a chat with regulators as well.
Two out of the top three cryptocurrency exchanges in the world are not based in the U.S. and have taken steps to ensure that they are just one step removed from the jurisdiction of the SEC.
Those that were within the grasp of the SEC have not fared well.
Embattled crypto lender BlockFi, which received a capital injection from cryptocurrency exchange FTX US, reached a settlement with the SEC in February this year, even though BlockFi had claimed at the time that it would pursue SEC registration of the product.
The SEC may nonetheless be running out of time to stake its claim on the cryptocurrency landscape’s jurisdiction and more assertive moves by the agency could lead to a regulatory turf war adding uncertainty to an industry where several high-profile collapses because of excessive leverage have already rattled the nerves of investors.
Celsius Network, a cryptocurrency lender has filed for Chapter 11 bankruptcy protection and Three Arrows Capital, a major cryptocurrency hedge fund, has filed for Chapter 15 relief, with billions of dollars in unpaid loans.
